Hi every one,
The problem asks for the relevant costs doesn't ask for total costs.
The relevant manufacturing costs is only total avoidable cost internally. So, total costs is (30+4) /unit but if ABC stops making products it will avoid only (30) and the other 4 will continue.
The relevant of buying from outside is only net of total paid costs. So, total cost is 28 minus 1.6 /unit = 26.40 $/unit.
So 4$ is fixed and will not change whatever the decision Make/Buy.
Finally relevant costs for making = 30 not 34
Finally relevant costs for buying = (28-1.6) not 30.4
Of course total cost is 34 for making and 30.4 for buying respectively
Please note 1.6 = (80,000*0.4)/20,000
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